My primary contribution was to offer some high-level observations on the total cost of health care. To begin with, Oregon has been a national leader in managing utilization. In a recent study by the Network for Healthcare Improvement—which analyzed cost and utilization across five regional commercial markets—Oregon’s utilization was lower than average, something of which we should be proud. The problem, is that we also have the highest cost: seventeen percent about the regional average.

Cost is the elephant in the room. It is driving the polarization and the politics because health care is the only economic sector that produces goods and services that most of its customers cannot afford, yet all of who will eventually need, often literally as a matter of life and death. The only way an economic “market” works under the circumstances, is if the cost of care is heavily subsidized—which is why, for the past fifty years, the health care debate has been focused on the revenue side; that is, figuring out how to pay for that subsidy either through public or private insurance.

What is missing from this debate is the explicit acknowledgement that this is not just a revenue problem—it is also a cost problem; that the current model is unsustainable and that there is no lasting solution to the problems facing our health care system unless we can lower the total cost of care. One obvious way to help do this is for purchasers (both public and private) to take a larger and more aligned role in asking the health care system to do things differently.

Twenty years ago, in Oregon we were moving in this direction. The state, as a large employer—purchasing health care for around 300,000 people—was trying to move the dial on how that care was being purchased. The Public Employees Benefit Board (PEBB) was putting our RFPs that focused on transparency, quality and the establishment of patient centered “medical homes” long before medical homes became a common term in health care. There was also a good bit of enthusiasm in the private sector as well, with conversations about developing a “purchaser’s coalition.” This was during my second term as governor and just before the recession of 2002-2003.

Since then we seem to have lost momentum. There are a number of reasons for this. Frist, many of Oregon’s largest employers are now national and international and many of them are headquartered outside the state. Their focus is more global and not on being aggressive health care purchasers within the state. This leaves many small and some medium sized employers who don’t have the time, bandwidth or capacity to be effective purchasers.

Second, many of Oregon’s largest employers are now hospitals and health systems, and some—like Providence and Peace Health—are also headquartered outside the state. The way the debate is currently being framed, these large employers have inherent conflicting incentives for using their purchasing power to drive down the total cost of care. Furthermore, much of the health care sector in general, and hospitals in particular, do not view themselves—nor are they viewed—as part of the larger business community gathered at the Business Summit.

We saw this fissure play out earlier this year when we were trying to close a $1.4 billion revenue shortfall in the state general fund, over half of which was in the Medicaid budget. Both the business community and the health care sector developed proposals to address the problem, but there were issues around coordination and, frankly, a lack of trust between the two groups. There is a way through this, but it will require an intentional effort (which should be started as soon as possible) to align these two powerful groups of payers and refocus them on being effective purchasers in the Oregon health care market.

Finally, the state—as a larger employer and purchaser—could be doing a lot more to help reduce the total cost of care. The legislative directive in Senate Bill 1067 to combine PEBB and OEBB (Oregon Education Benefit Board), while it may make some sense from an administrative standpoint, will do little to reduce cost—even though it was heralded as a “cost containment” measure by legislative leadership. Currently, both PEBB and OEBB are operating more like benefit managers than purchasers, and that needs to change.

I understand from firsthand experience, that reducing the cost of health care is seen as a “take away” at the bargaining table and is often equated to “reducing benefits.” However, that does not have to be the case. As we have demonstrated with our CCO (coordinated care organization) care model, it is possible to reduce the total cost of care without reducing benefits; and while improving quality, outcomes and patient satisfaction. The same can, and should, be done with PEBB and OEBB.

I have long been a supporter of organized labor and of the collective bargaining process. I do not support reducing health benefits for public employees but, at the same time, I believe we can reduce the cost of providing those benefits through smart purchasing and being open to new models of care. We simply need the political space in which to have that conversation.

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John Kitzhaber has over forty years of experience in health policy and politics in both the public and private sectors. He authored the groundbreaking Oregon Health Plan and was the chief architect of Oregon’s Coordinated Care Organizations. In 2013 Modern Healthcare Magazine ranked John #2 on list of the “100 Most Influential People in Health Care;” and #1 on the list of the “50 Most Influential Physician Executives.